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Education
The impact of coming < $50 Card-not-present monthly FANF $2.00
FANF changes $50 – $199 $2.90
$5.00
$200 – $999
$7.00
By Ken Musante $1,000 – $3,999 $9.00
$4,000 – $7,999
Eureka Payments LLC $8,000 – $39,999 $15.00
efore e-commerce merchants existed, trans- $40,000 – $199,999 $45.00
action aggregation was called factoring and $200,000 – $799,999 $120.00
was against the card-brand rules. It worked $800,000 – $1,999,999 $350.00
B like this: one merchant processed transactions
through another merchant's account, often paying the $2,000,000 – $3,999,999 $700.00
accountholder merchant a fee of 10 to 25 percent of the $4,000,000 – $7,999,999 $1,500.00
amount processed. $8,000,000 – $19,999,999 $3,500.00
$20,000,000 – $39,999,999 $7,000.00
Businesses would pay this exorbitant rate either because $40,000,000 – $79,999,999 $15,000.00
they could not get accounts of their own or their chargebacks
and returns were expected to be enormous. When returns $80,000,000 – $399,999,999 $30,000.00
and chargebacks came in, unsuspecting accountholders $400,000,000 + $40,000.00
had to pay up – and often landed on the MATCH report,
unable to get accounts themselves. • Settle funds to the sponsored merchants
• Submit the appropriate merchant category
With the rise of e-commerce, aggregation became code (MCC) with each sponsored merchants'
increasingly common despite the rules, which still transactions
prohibited it. Merchants were processing for other
businesses; some even incorporated the practice into their • Submit regular reports to both card networks
business plans. The card networks couldn't keep up with • Not submit transactions from specific higher
the changes ignited by e-commerce, and when entities risk merchant types:
like PayPal Inc. stormed to the fore, they saw the need to
regulate rather than prohibit aggregators. Excluded sponsored merchant categories
include buyers/membership clubs; credit
Today, both major card companies have rules for counseling/repair services; credit/identity
aggregators. MasterCard Worldwide calls such entities theft protection; direct marketing/subscription
"payment facilitators." Fortunately, Visa Inc. abandoned its merchants; infomercial merchants; Internet
"payment service provider" moniker in favor of "payment pharmacies/Internet pharmacy referral sites;
facilitator." Large and small payment facilitators must multilevel marketers; outbound telemarketers;
adhere to the same rules, despite the appearance that some rebate-based businesses; and upselling
"super" payment facilitators have their own set of rules. (I merchants.
cannot attest to how they are regulated, merely that there In addition, sponsored merchants must not exceed $100,000
isn't a separate set of rules, regardless of size.) in either Visa or MasterCard volume annually (exceptions
can be granted).
What is a payment facilitator?
Generally, payment facilitators are merchants who: Payment facilitators perform services a regular merchant
would normally have to handle, such as web development,
1. Use their own payment facilitator names as the integration and customer service. While this limits the
transaction descriptor. Ideally, a payment facilitator work performed by sponsored merchants, they are forced
will use a dynamic descriptor whereby the first three into the confines of their payment facilitators. This works
or four characters of the descriptor reflect the payment well for specialized merchant types such as elementary
facilitator, followed by an asterisk (*), followed by the school registrations and school meal plans. Individual
variable component of the descriptor describing the schools or sponsored merchants don't have to build their
sponsored merchant own payment modules or integrate payments into their
2. Represent sales as being administered by the websites. Nor do they have to independently attain Payment
payment facilitator and not the sponsored merchant Card Industry Data Security Standard certification, which
3. Provide dispute resolution and customer service is done at the payment facilitator level.
through the payment facilitator In turn, they pay slightly higher variable fees but work
Other rules require the payment facilitator to: with larger entities that deeply understand their business
• Register and pay the associated registration fees types and build modules and service plans tailored to
the sponsored merchants' customers. Additionally, a
• Maintain liability for any chargebacks sufficient number of elementary schools have a combined
48
The impact of coming < $50 Card-not-present monthly FANF $2.00
FANF changes $50 – $199 $2.90
$5.00
$200 – $999
$7.00
By Ken Musante $1,000 – $3,999 $9.00
$4,000 – $7,999
Eureka Payments LLC $8,000 – $39,999 $15.00
efore e-commerce merchants existed, trans- $40,000 – $199,999 $45.00
action aggregation was called factoring and $200,000 – $799,999 $120.00
was against the card-brand rules. It worked $800,000 – $1,999,999 $350.00
B like this: one merchant processed transactions
through another merchant's account, often paying the $2,000,000 – $3,999,999 $700.00
accountholder merchant a fee of 10 to 25 percent of the $4,000,000 – $7,999,999 $1,500.00
amount processed. $8,000,000 – $19,999,999 $3,500.00
$20,000,000 – $39,999,999 $7,000.00
Businesses would pay this exorbitant rate either because $40,000,000 – $79,999,999 $15,000.00
they could not get accounts of their own or their chargebacks
and returns were expected to be enormous. When returns $80,000,000 – $399,999,999 $30,000.00
and chargebacks came in, unsuspecting accountholders $400,000,000 + $40,000.00
had to pay up – and often landed on the MATCH report,
unable to get accounts themselves. • Settle funds to the sponsored merchants
• Submit the appropriate merchant category
With the rise of e-commerce, aggregation became code (MCC) with each sponsored merchants'
increasingly common despite the rules, which still transactions
prohibited it. Merchants were processing for other
businesses; some even incorporated the practice into their • Submit regular reports to both card networks
business plans. The card networks couldn't keep up with • Not submit transactions from specific higher
the changes ignited by e-commerce, and when entities risk merchant types:
like PayPal Inc. stormed to the fore, they saw the need to
regulate rather than prohibit aggregators. Excluded sponsored merchant categories
include buyers/membership clubs; credit
Today, both major card companies have rules for counseling/repair services; credit/identity
aggregators. MasterCard Worldwide calls such entities theft protection; direct marketing/subscription
"payment facilitators." Fortunately, Visa Inc. abandoned its merchants; infomercial merchants; Internet
"payment service provider" moniker in favor of "payment pharmacies/Internet pharmacy referral sites;
facilitator." Large and small payment facilitators must multilevel marketers; outbound telemarketers;
adhere to the same rules, despite the appearance that some rebate-based businesses; and upselling
"super" payment facilitators have their own set of rules. (I merchants.
cannot attest to how they are regulated, merely that there In addition, sponsored merchants must not exceed $100,000
isn't a separate set of rules, regardless of size.) in either Visa or MasterCard volume annually (exceptions
can be granted).
What is a payment facilitator?
Generally, payment facilitators are merchants who: Payment facilitators perform services a regular merchant
would normally have to handle, such as web development,
1. Use their own payment facilitator names as the integration and customer service. While this limits the
transaction descriptor. Ideally, a payment facilitator work performed by sponsored merchants, they are forced
will use a dynamic descriptor whereby the first three into the confines of their payment facilitators. This works
or four characters of the descriptor reflect the payment well for specialized merchant types such as elementary
facilitator, followed by an asterisk (*), followed by the school registrations and school meal plans. Individual
variable component of the descriptor describing the schools or sponsored merchants don't have to build their
sponsored merchant own payment modules or integrate payments into their
2. Represent sales as being administered by the websites. Nor do they have to independently attain Payment
payment facilitator and not the sponsored merchant Card Industry Data Security Standard certification, which
3. Provide dispute resolution and customer service is done at the payment facilitator level.
through the payment facilitator In turn, they pay slightly higher variable fees but work
Other rules require the payment facilitator to: with larger entities that deeply understand their business
• Register and pay the associated registration fees types and build modules and service plans tailored to
the sponsored merchants' customers. Additionally, a
• Maintain liability for any chargebacks sufficient number of elementary schools have a combined
48
